The Gaddie family has been in the education business for decades. In the 1970s, members operated the John Hancock Academy in Mesa, teaching children back-to-basics that included phonics, morality and other conservative values. Later, they moved to higher education, operating the Mountain States Technical Institute to teach vocations like mechanics and air-conditioner repair to the dropped-out and the downtrodden.

During that time, the Gaddies were charged, fined or investigated by nearly every government and private agency that has some sort of say in the school business.

Before finally filing for bankruptcy in 1991, Mountain States was sued multiple times by creditors who hadn't been paid and by students who claimed their student-loan and grant money had disappeared. Now the Gaddies want state funds to open two charter schools, one a traditional school for young students, the other a vocational school for older students. They very well may get the money.

Since the charter school law was passed last year, Arizona has run straight to the front of the class. Within the last five months, the state has approved more than a third of the charter schools in the entire country.

At a time when the public school system is overburdened with students, social ills and regulations, it has become abundantly clear that Arizona's method of solving the state's education problems is to build a new system. This one is market-driven, competitive and on contract to take over the state's obligation to teach its children. Education is now a business venture.

Charter schools function much in the same way as defense contractors. They are private businesses contracted by the state to educate children. The state pays an amount equal to that of public school funding--about $3,500--for each student enrolled. Arizona is one of only two states (the other is Minnesota) that allows private schools to be chartered. It is the only state that allows charter schools to be profitable. That's an appealing notion when you consider that public education is a $1.7 billion-a-year industry in Arizona.

Arizona is also the only state that allows charter schools to function as independent legal entities. Charter schools are free from much of the nearly 800 pages of regulations in the Arizona Education Code. They don't have to employ state-certified teachers. They don't have to pay them a standard wage. They may not have to contribute to their retirement funds. "If you can wake up in the morning and fog a mirror, you're capable," says Kay Lybeck, president of the Arizona Education Association, the state's largest teachers union.

Ironically, the same state government that created a monstrosity of regulation for the public school system decided that charter schools were better off without most of it.

And already, there is a push to further free their hands. The Goldwater Institute is lobbying to allow charter schools to skip the state's daunting accounting requirements--including a cap on how much money schools can hang onto from one year to the next--and even more of the education code.

There are about 140 charter schools in the country, scattered across 11 states. By June, Arizona will have an astonishing quarter of all the charter schools in the entire nation. The state allows a total of 50 to be approved each year, but does not limit the total number of charter schools that may operate in the state.

Charter schools are a growth industry.
"The interest is incredible," says Linda Fuller, who heads a five-person department that processes charter school applications at the Department of Education. "I don't think anybody thought there would be this many applications."

In the meantime, the abuse that can come with charter schools is demonstrated by a situation in California.

The Los Angeles Unified School Board revoked a charter earlier this year from Edutrain, Inc., which had run a special school for dropouts since May 1993. The school, home to more than 500 students, was nearly $1 million in debt and owed the L.A. district at least $240,000 for students it had never enrolled. At least part of the money reportedly had gone to lease Edutrain's principal an expensive sports car, pay his rent and hire a bodyguard, as well as underwrite a $7,000 staff retreat in Carmel.

Delite Gaddie, a Mesa mother of five children, was so disgusted with her children's education that she and her husband, Ernest, got in their Volkswagen bus in 1970 and drove across the country to observe a school in Virginia with a reputation for success. There, they saw children learning to read by using the McGuffey Reader. They were inspired to start the John Hancock Academy in Mesa upon their return home. The school was attended by the Gaddie children and a few others. The Gaddies sold that school nine years later. Next stop was Mountain States Technical Institute, a vocational high school, and later postsecondary school. The Gaddie sons and daughters worked at the school, too, as did the daughters' husbands. It was truly a family business.

The postsecondary trade school was supported primarily by student aid and grants, and regularly recruited its pupils from welfare lines, plasma centers and Laundromats. The Gaddies intended to help "the least of the bretheren."

But it didn't exactly work out that way.
Delite and Ernest Gaddie's Mountain States Technical Institute closed in 1991 following investigations by the Internal Revenue Service, U.S. Department of Education and the state Board for Private Postsecondary Education, among other boards. The Gaddies were accused of improper use of government student-loan money, fraud and other complaints.

Mountain States filed for bankruptcy in 1991, leaving in its wake a flurry of civil lawsuits from creditors and students.

But the Gaddies are not easily discouraged. In October of last year, when the charter school application parade began, the Gaddies applied to start the McGuffey Basic School, which would use the McGuffey Reader in a morally based curriculum.

The McGuffey Reader, the standard text around the turn of the century, makes reference to God and is generally held to be offensive to minorities. The Arizona Attorney General's Office, which reviews curricula at the behest of the state Board of Education, said no to the McGuffeys.

And the board said no to the Gaddies. Undeterred, Gaddie daughters Kelly Wade, Lisa Davies and Lora Jonas filed an application with the state Board for Charter Schools for the Patrick Henry Basic School. None of the three has more than a high school diploma, according to their application, nor will they require certified teachers in their school. However, they have extensive experience teaching children in their church. Patrick Henry also is a traditional, back-to-basics school with an emphasis on phonics. In fact, the Patrick Henry School application is, word for word, identical to that of the McGuffey Basic School, except for the McGuffey Reader.

The Patrick Henry application is still pending, since the board has some questions about the school's financial structure. While the sisters were preparing their application, their brother Reed Gaddie applied for a charter for Arizona Apprenticeship Training. Reed Gaddie envisioned a vocational school designed to teach high schoolers the heating, ventilating and air-conditioning trade. Reed Gaddie is a graduate of the school his parents ran until government investigations forced its closure in 1991, Mountain States. In fact, after graduation, he was head of its air-conditioner-training department. His application states that he will be the sole governing body of Arizona Apprenticeship Training. His application has been approved by the state Board for Charter Schools, pending a background and credit check. The application does not mention that Reed Gaddie was charged with possession of drug paraphernalia in 1988, while he was a teacher at Mountain States. Ironically, all three Gaddie school applications state that illegal activities are cause for dismissal.

The autonomy of charter schools may open up other areas of abuse, as well.
Like religion.
The state is prohibited by the Constitution from funding schools that teach religion. But the actual policing hasn't been worked out yet, and a handful of applications are skirting the edge of the law.

Christine Battelle's is one of them.
In October, Battelle applied for a charter from the state Board of Education for her Phoenix Academy of Learning. The school's plan is based on the Delphian School near Portland, Oregon, which is tied to the Church of Scientology and includes curricula based on the teachings of L. Ron Hubbard. The board balked. Battelle retooled her application and promised not to teach religion. In January, the board approved Battelle's school. Meanwhile, the Noah Webster Academy in Ionia County, Michigan, landed that state's charter school law in court late last year. The academy had received a charter from the state to provide instruction based on "moral lessons" via computer to home schoolers.

The ACLU and the Michigan teachers union, however, successfully argued that the state was paying for Noah Webster Academy to distribute its religion-based curriculum. A Michigan circuit court found the state's charter school law unconstitutional. Michigan's legislature adopted a new version of the law, which will take effect next month.

A similar lawsuit in Arizona could put a hold on every charter school in the state.

The enthusiasm for chartered private education is primarily pent-up frustration at the failings of public schools. In their finest form, charter schools can do things that local school districts haven't, like provide a more individualized education--and keep kids in school.

It takes exactly one glance through charter school applications to see where the public school system is failing. Almost all of the charter schools will limit enrollment. They're decidedly small, and so are their classes. In most cases, students have only one or two teachers who stay with them for several years. Schools are being proposed in all shapes and sizes, tailored to particular niches of students. Politically, they're all over the landscape, but primarily conservative. There are Montessori elementary schools, alternative high schools, vocational education schools, phonics-based reading programs, multiple language and arts schools reminiscent of the movie Fame.

There are no frills, no football teams, cheerleaders or marching bands. Most of the charter school students will use public libraries, take their lessons on a computer and move at their own pace. The schools have few administrators and no elected local school board members. In many cases, parents are required to participate in order for their child to attend.

In short, charter schools are the boutiques of schooling, taking education out of the factorylike public school system and making it a cottage industry.

Of the 50 charter schools that can be approved this year, 25 may be approved by the state Board of Education and 25 by the state Board for Charter Schools--a governor-appointed group whose entire job is to approve or reject charter school applications. Local school districts also may approve charter schools within their districts, but few have. That's mostly because the start-up funds would come out of the local district's budget instead of directly from the state. Schools are chartered for five years at a time; charters won't be renewed if the school has not met the goals of its contract with the state.

"The kids are our clients, and if we don't serve them, we go out of business," says Michael Matwick, whose charter school recently gained approval by the state Board of Education. "Our quality has got to be better than the public school system or it's over."

Profit-making is not new in the school business. Baltimore, Maryland, and Hartford, Connecticut, both have hired Education Alternatives Inc., a Minneapolis-based corporation, to take over their school systems, much to the chagrin of local teachers unions.

Best known, however, is media mogul Chris Whittle's Edison Project. The company, which includes former Yale University president Benno Schmidt, spent $40 million planning its version of the perfect school, and lobbied extensively for charter school legislation. Although the company has had its problems--it's running about three years late; Whittle Communications crumbled last year, forcing the sale of its other education venture, Channel One--the Edison Project finally landed contracts to run six schools. They're in Kansas and Massachusetts.

Neither EAI nor Edison has been able to show a dramatic increase in student performance or profitability. But it's too soon to tell.

"I'm looking for someone who's got a clear vision. A real Sam Walton type," says John Huppenthal, Republican chairman of the Senate Education Committee and a member of the state Board for Charter Schools. Michael Matwick and Adele Ferrini think they answer that description. They have run dropout-prevention programs at Marcos de Niza High School in Tempe for years. Now they're hanging out their own shingle.

Known as Arizona Career Academy, Matwick's and Ferrini's new school is tailored to students who aren't making it. They'll take anyone in high school as well as those who've dropped out.

It's no small challenge. And they've bet the store on it. Arizona Career Academy has promised the state a 90 percent graduation rate, 20 percent more than Arizona's getting across the board for its public-school dollar now. Matwick and Ferrini have also promised the state that students will leave their school ready to support themselves in a career.

Their plan calls for students to spend part of their time at jobs, working everywhere from Motorola to an auto repair shop. Students will take corresponding classes through GateWay Community College, East Valley Institute of Technology or other vocational schools.

Classes are offered in blocks from 8 a.m. to noon, noon to 4 p.m., 4 p.m. to 9 p.m. and all day on Saturdays. Students thus have plenty of opportunity to go to school, regardless of job schedule, transportation problem or child-care crises.

The plan is not new. It's something Matwick and Ferrini have been doing in bits and pieces at Marcos for years. "Everyone treats these kids as though they're irresponsible," Matwick says. "They're not. They are raising families and working. They're just not interested in school, or it doesn't work for them."

Matwick and Ferrini are opening two sites this fall. Each will house 150 students, an administrator, counselor and one certified teacher for every 25 students. The school doesn't even have stationery yet, but does have 26 letters of intent from future students. And Matwick says they've been contacted by more than 70 potential teachers.

Arizona has moved toward charter schools so quickly, no one knows what regulations govern them.

No one knows if charter school teachers are eligible to participate in the state's retirement system. Nor is it clear how money will be disbursed to the schools in July. Or how much of a $1 million stimulus fund each new school will get.

School owners are faced with the state's daunting accounting and finance system, along with procurement codes that govern the purchase of everything from buildings to pencils. And they will have to deal with federal regulations dictating everything from the rights of disabled children to the handling of compressed natural gas.

Adding to the confusion was a changing of the guard at the Department of Education in January. Republican Lisa Graham took over as superintendent of public instruction from former Democrat C. Diane Bishop and brought with her a new staff, mostly from the business arena.

One thing is clear, however. State officials want charter schools, and that's where they'll put their money.

Arizona will spend $16 million to $20 million funding new charter schools--including $4.5 million in funding for students formerly in private schools--and another $1 million in stimulus funds to help the start-ups. That's a lot of money, especially at a time when public school buildings throughout the state need more than $100 million in emergency repairs just to keep them safe.

For better or worse, Arizona has decided that education is essentially a business. The new state Board for Charter Schools--Symington's appointees--is predictably heavy with conservatives.

The board includes Representative Jeff Groscost, a conservative; east Mesa Republican, and owner of a day-care center, Chairman Don Flake; and free-market business champions Senator John Huppenthal and Senator Ken Bennett, who represents business on the state Board of Education. The board is low on educators.

These advocates of charter schools assume that in a free-market, competitive situation, education will improve. They assume that as the public school system sees money walking out of the classroom into a charter school, it, too, will improve. Margaret Williamson is the spirit of charter schools: the woman who thinks she can do better than the public school system if only she had the chance. She is also a good example of how sterling intentions mean nothing in the dog-eat-dog world of educational capitalism.

"I got into this because I wanted to help kids," Williamson says. "I wanted to teach. I knew I could use my retirement funds for start-up funds."

Two years ago, Williamson left her job of 20 years, cashed in her state retirement and opened an alternative school, Academy With Community Partners. She educates 30 teenagers who probably otherwise wouldn't be in school. There are 12 more on a waiting list. Most have dropped out of other East Valley high schools. Classes take place in a tiny storefront near Extension and Southern in Mesa. Most of the assignments are completed on computers donated by Wal-Mart. Students go to Powerhouse Gym for physical education. Sophomore Brandon Perry runs the student store selling candy and pop and sundries to raise money for activities. Kids learn business, marketing and communications skills by selling products to raise money. Laura Rufh, a senior, is starting a newsletter for the students. Most go to school for free. Charging tuition would mean excluding the bulk of her students. But Williamson's school is near bust. Her savings are gone. She's sold her house. The school is surviving on a shoestring between donations and some grant money. Williamson counted on her school becoming a charter school, which would bring with it state funding for students.

But after five months of questions and answers and information filing, the state Board of Education last week rejected Williamson's application for a charter.

The problem is that Williamson is not a businesswoman, nor an administrator. She's a teacher. Her application is not a business plan. And that's what's needed in today's school market.

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Lisa Davis